Turnkey Contracts for PV

Photovoltaics financing

Roof integrated systems like the BP Solar EnergyTileTM that can withstand wind, rain, hail and snow. You do not have to buy them to have them on your own roof. Photo: BP Solar Turnkey contracts for PV You do not have to buy your own PV system to benefit from cal water department) researched how to install solar panels on his own roof, he was “shocked about the the sun. US based companies offer other models like leasing obstacles”. He turned the experience into a business or giving permission to use your roof and then paying for the idea, forming a company that would help home owners with the financial burden of installation, as electricity produced. This might do the trick for many well as the legal and construction permits. “It occurred to me, when we get electricity from a American houseowners. power company, we do not build a power plant in our limate-conscious residents in California and backyards. We just pay for the electricity we use. The Arizona who decide to switch from brown to same way we should not have to invest in solar sys- Cclean power are no longer hindered by high tems either”, says Kreamer. upfront costs of US$ 20,000 to 35,000 when instal- SunRun, backed up by a US$ 12 million invest- ling solar panels on their private roofs. Companies ment by Foundation Capital, came up with two financ- like SolarCity (Foster City, CA) and SunRun (San Fran- ing models – the SunRun Power Plan and SunRun To- cisco, CA) about a year ago started offering financing tal Solar. With the Power Plan, the customer basically models that release homeowners from having to provides a roof without having to purchase the panels, purchase a photovoltaic system. With a turnkey con- and pays a fee of US$ 2,000 to 8,000. The rates are tract, the customer buys solar power through a long- then locked in at 13.5 US-ct/kWh over the next 18 term agreement with a guaranteed utility rate; solar years. This rate is already below the average residen- power which was generated on their own roof. And tial price per kWh in California, which, depending on apart from reducing the carbon footprint, the compa- the amount of usage, can be as high as 30 US-Ct/ nies offer free maintenance and promise a 15 to 20 % kWh. reduction in the electricity bill. With the second plan, Total Solar, the customer, SunRun, founded in 2007 by three entrepreneurs, instead of buying the system, pays for his solar elec- aims to “make going solar easy, smart, and afford tricity upfront and also receives the Federal Incentive able for everyone.” When President and founder Nat Tax Credit (ITC). With both options, the company owns Kreamer in 2005 (he then was still working for the lo- and insures the panels against damage or theft (a

122 Sun & Wind Energy 4/2009 growing hazard), and will replace any broken equip- years last August while oil prices shot up, the solar in- ment, like inverters and panels. The agreement also dustry experienced a peak; SolarCity secured 1,000 includes free monitoring of the performance of the contracts within two months. panels, which the customer can track on the compa- California is the front runner in the US residential ny’s website. All of these service components would market when it comes to solar panels on private be additional costs to the customer if he decided to roofs, with close to 40,000 PV systems installed by purchase a solar system independently. last August. But it is still not reaching homeowners, “We wash the panels when needed, and make sure who cannot afford another major investment that they will reach highest performance, even when the usually involves taking out a loan. family is away on vacation”, says COO Nat Kreamer. “There is no need to purchase a solar system And if the system does not provide what it promised, anymore”, says Nat Kreamer from SunRun. However, Kreamer adds, “we will pay the electricity bill”. The sys- by January, SunRun had attracted 3,000 customers tem design is based on household needs, and can be for its SunRun Power Plan. In January Kreamer an- extended, if the family decides to buy an electric car or nounced another reduction of the upfront costs to has other needs. Customer testimonies claim that a US$ 2,000, or a first year payment plan, when the monthly bill of about US$ 300 went down to US$ 75. monthly payment is set to US$ 250. After the first year, the bill will go down to US$ 70 and stay con- PPA and lease agreements stant throughout the contract term of 18 years, if usage does not change dramatically. SolarCity, the second company who offers a system At the moment the SunRun offer only includes without having to purchase it, started in April 2008 to California, but “we are looking at all the states where offer a long-term lease contract. The SolarCity bill net metering is available”, says Kreamer. Also Solar- consists of a payment for leasing the equipment and City has been active for residential customers in two the usage portion, which is offset by the panel’s out- states: California and Arizona. And CEO David Arfin put. Whereas the SunRun bill can even go down to ze- plans to extend its market to about five more states ro, if the panels’ output is higher than the usage, net this year. metering limits the size of the system – with the ex- In the US, where feed-in tariffs are rarely offered to ception of a few states in the US – to a maximum of private customers and net metering was implemented 2 MW, often even less. by law only in 2005, what drives solar energy produc- By December 2008, eight months after the pro- tion are state tax incentives and the sun irradiance. In gramme was launched, SolarCity counted 400 em- a state like Arizona, high sun irradiance still promises ployees and more than 2,500 customers. Recently in- vited as a panelist to a green power conference in New York, founder David Arfin claimed, “I go to parties where people are proud to have a solar system on their roof – that is even better than the first Priuses.” The advantage of a PPA (power purchase agreement) or a lease agreement over purchasing a solar system is clear. Apart from relieving some of the financial burdens, the companies use top level tech- nology while working together with BP Solar and First Solar, who deliver the photovoltaic systems that come with a 25-year warranty. “One concern homeowners often approach me about is the roofing warranty”, says Kreamer. “Our system does not void the roofing material warranty.” In December 2008, SunRun announced a new partnership with the installation company OCR Solar & Roofing for Northern California, which has been in the business for more than forty years, offering a pre- mium category of roof integrated solar panels, which blend seamlessly into the design of the roof. And Kreamer is convinced that when the homeowner decides to sell his house, the solar system becomes an asset more than an obstacle. The customer can trans- fer the contract to the next homeowner, who can con- tinue the contract, or renew it. What makes the business attractive for the solar company are both the federal tax credits and the state incentives, which they collect as the owners of the system. When the solar investment tax credit, a federal programme, was extended another eight

Sun & Wind Energy 4/2009 123 Photovoltaics financing

metering awards credits to the yearly electrical bill – when more electricity is produced than used by the household. Nevertheless, in only a few states customers receive a payment; California set a feed-in tariff of 39 US-ct/kWh, which will decrease and expire by 2011. The rate in New Jersey is way below the market rate with 12 US-ct/kWh versus 18 US-ct for usage. Panels to rent

“Owning a solar system is just not attractive in the US”, says Erika Morgan from Citizenre, another play- er on the market. Citizenre announced the idea of renting solar panels to customers back in 2006, but the high costs of a start-up company for a large scale project like this, and the recent crash of the financial market, have slowed the launch dramatically. Still in its pilot phase, Citizenre plans to offer solar panels for rent in all of the US states where net metering is available. Thirty five thousand customers have signed up, and “we are not marketing any more”, says Morgan, explaining that is to avoid a backlog when the project finally starts, which is prospected to hap- pen this year. Rental agreements with Citizenre are coming out to about US$ 75 per month for a 4 kWh system. This will offset a yearly utility bill for 6,000 kWh close to 40 %. But these prices are based on rates from two The Bertrands’ SunRun home, San Diego: “Environmentally responsible without any years ago, and they will have to be adjusted, Morgan change in behaviour“, says SunRun to make the switch to green living as easy as says. Contracts with Citizenre last between 5 to 25 possible. Photos (2): SunRun years, where rental rates are locked, but can be cancelled by customers before the term end is reached. savings even when incentives are low, because the The fact that the contract can be cancelled at any time high photovoltaic output makes it attractive. is the main advantage, Morgan explains. “We just The biggest advantage for homeowners is zeroing come and pick up the panels and install them on an- out the electrical bill, even though they barely accu- other roof.” Maintenance and moni- mulate profits from it, as homeowners in Germany, Before entering into a contract with Citizenre, the toring is included in the France or Spain can do. In the best case scenario, net customer agrees to a household audit for energy effi- contract with SunRun and with SolarCity.

124 Sun & Wind Energy 4/2009 ciency and receives an action plan to reduce energy usage. Based on that, the company designs a system that fits the needs of the household. European households can be a model: in 2007, the typical German household used a third of the electricity of a US household. “We are much less efficient, our homes are larger and we have to learn a lot, when it comes to conservancy”, says Morgan. Citizenre had originally planned to open its own production facility, but the price declines of wavers and panels will very like- ly ease this effort into purchasing panels for high volume rates, says Morgan. In the state of New Jersey, the Public Service Electric and Gas Company (PSE&G), the largest power company in the US, last year started offering its customers solar loans under a 10 to 15-year term, which will cover about 40 to 60 % of the total cost for the investment. The borrower can either repay the loan in cash or by de- livering Solar Renewable Energy Certificates (“SRECs”) generated by the solar systems to PSE&G as payment. A US$ 105 million programme was launched in New Jersey with the goal of a total of 30 MW additional solar power over the next two years. The PSE&G portfolio lists 2 % solar power by the end of last year, or a total of 3,500 projects. Nat Kreamer from SunRun is skeptical about these loan pro- grammes, however, he does not believe they motivate customers to make the switch. Until recently only commercial customers, such as schools, businesses, and governmental offices, were the Professionals in typical customers of football field sized solar panel systems, installed on flat roofs and parking lots at no cost through a PPA. Renewable Energies SunRun, SolarCity and Citizenre are now providing the base to make photovoltaics a “consumer brand.” “It’s time for the mass with your job opportunity in SWE! adoption of solar”, says Kreamer. Anja Limperis Further information: www.sunrunhome.com www.solarcity.com www.citizenre.com www.pseg.com/customer/solar/ Your job offer will appear:

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